Are the republicans out to abolish US social programs

Au--
I don't have any special knowledge of economics. During Bush's campaign, he said that the numbers of Americans approaching retirement age over the next decade could not be served by Social Security/Caid and Care. Seeing the numbers relating to the Baby Boomers who are 'coming of age', I agreed with his assertion that the system would have to be changed.

He wasn't the first Presidential candidate, or politician, to say this, but the first one with the nerve to say that he felt the change must be made now. I agreed.

So, no. I don't think Republicans are trying to obliterate social programs. I think the current Republican President is following through with his pledge to re-work the programs alluded to in your article (SS, Caid/Care). The Democrats are in safe territory criticising the changes--because all Americans are concerned about their retirement. But, to act as though these particular programs can go on unchanged is deceptive. I don't believe it is possible.

I think it is a credit to the current administration to take on the unpopular issue, before there is a crisis.

I can't speak to other programs, other than AA. I believe the changes are not to destroy programs, but to make them more efficient and less wasteful.

Sofia
The changes were needed to strengthen it and to shore it up. Bush as a result of his tax cuts has increased it's jeopardy. I should also note that despite his grand assertions nothing has been heard from him in that regard. In fact the commission he created to come up with suggestions for a fix came up dry. There was no oil in that well. In the mean time he has bled the system dry and is ringing up enormous deficits. The credit card is about over the limit. I couldn't run a grocery store with Bush's economic policies.

Found this while searching Tax Cut opinion.

'Old Europe' and getting older
By William G. Shipman

During the diplomatic run-up to the war with Iraq, Defense Secretary Donald Rumsfeld introduced the term "Old Europe" to punctuate the opposition of Germany and France to the use of force in the impending conflict. In retort, French government spokesman Jean-Francois Cope offered: "An 'old' Continent -- a continent somewhat ancient in its historical, cultural, political, economic traditions -- can sometimes be infused with a certain wisdom, and wisdom can sometimes make for good advice."
The epithet "Old Europe" has another meaning, one that will be more determinate of the Continent's future than any perceived cultural advantage or inherited wisdom. Europe's population is aging: People are living longer, women are having fewer children, and the number of workers relative to retirees is shrinking. These trends will cause their Social Security systems and, more generally, the welfare state -- part of Europe's DNA -- to collapse. Old Europe, as we know it, is dying.
The beginnings of the welfare state were introduced by Germany's Chancellor Otto von Bismarck in 1889 when he adopted what is now called Social Security. Over the following years and decades many other nations, including the United States, followed his lead by also offering government benefits in large part to replace income lost to old age, disability, sickness, death, work injury and the like. As time progressed, the benefits became significant as did their costs.
In most cases these benefits are financed with a payroll tax, using what is often referred to as pay-as-you-go financing. In such systems benefits for today's elderly are paid by taxing today's young. And benefits to be paid to today's young will be financed by taxing tomorrow's young. This system is a simple transfer of wealth from young workers to older retirees. There is no saving or investment of resources for future economic growth.
For both taxes and benefits to remain reasonable, for the financial structure to remain stable, it is necessary that there always be many workers to tax relative to those who are benefit-eligible. This ratio of workers to beneficiaries is determined mainly by two variables: life expectancy and the birthrate. In Old Europe, both are moving in a direction that upsets this stability.
Throughout the Continent people are living longer. This is a result of, amongst other variables, better living and working conditions, better nutrition and health systems and greater wealth. According to the United Nations, life expectancy at birth in Germany, France and Italy is about 78 years of age; in the 1950s it was about 67.
And throughout much of Europe families are having fewer children. The birthrate that ultimately stabilizes a population is called zero population growth or ZPG for short. It is about 2.1 births per woman of childbearing age. Forty years ago most of Europe experienced birthrates well above ZPG. No more. Today, the birthrates are for France 1.7, Germany 1.4, Italy 1.2 and Spain 1.16, the lowest ever recorded for the human race. As has been reported before, "There is no single country in Europe where people are having enough children to replace themselves when they die."
The combination of rising life expectancy and falling birthrates results in a fall of workers relative to benefit-eligible retirees. According to the IMF, the ratio of contributors to retired beneficiaries in 1995 for France and Germany was 2.5 and 2.3, respectively. They have been on a steady decline and over the next five decades they are expected to drop to 1.4 and 1.2.
The political response to such a demographic squeeze has often been an increase in the payroll tax rate on the shrinking -- relatively, that is -- work force.
In the United States, for example, the employee and employer combined Social Security tax in 1950, when there were 16 workers per beneficiary, was 3 percent on a wage limit of $3,000. This year, with only 3.3 workers per beneficiary, it is 12.4 percent on $87,000. The maximum tax has jumped from $90 to $10,788. By European standards, however, it is low. The payroll tax in France is 49.3 percent, Germany is 40.9 percent, Italy and Spain are 42.5 and 37.8 percent, respectively. And unlike the United States, in many cases, but not all, the tax applies to all earnings. Yet, these numbers actually understate the burden placed on European workers for in each country the payroll tax revenue is not enough to finance benefits. Additional taxes are levied to make up the difference.
For many Western European countries, the shortfall of prospective taxes to benefits, the result of demographics, is greater in present value terms than the total value of government bonds outstanding in each country. Government debt including unfunded pension liabilities in some cases is multiples of commonly measured sovereign debt.
How "Old Europe" deals with these realities will largely determine its destiny. The elderly are absolutely dependent on institutions that are fundamentally, and demographically, unsound. The tax burden on workers is prohibitive causing avoidance in many forms including earlier retirement that further stresses the system.
Europe's economies and institutions are at risk. And yet, part of Europe's culture, the welfare state broadly defined, is a hard-wired reality of the region. Something will have to give.
Mr. Rumsfeld's characterization, "Old Europe," raised the ire of some of our European partners who responded that Europe's long history gave it a wisdom that a relatively young United States could not yet have acquired. Maybe so. If that is the case, it will need to harness that wisdom to solve an extraordinary challenge it can no longer avoid.

William G. Shipman is chairman of CarriageOaks Partners LLC and co-chairman of the Cato Institute's Project on Social Security Choice.

Cope may have been onto something when he said the US may have something to learn from Old Europe. I know our birth rate hasn't decreased to match the Europeans, but we have evidenced the decline in wage earner to retiree ratio. The trend leads me to believe 'shoring up' is not the answer. Change is the answer. I'm still not sure Bush's prescribed change is the best, but I haven't heard another idea.

Do you think more money will be the answer indefinitely for the problems facing Social Security? If not indefinite--how long can we sustain SS with bail outs? The numbers approaching payoff are astronomical.

Sofia
I had seen that article before. We are having the same problem as the rest of the world does. However, Bush's giving away the surplus only lessens the time before catastrophe occurs giving less time to find a solution.
I suppose we could always put the elderly on ice floes and let them float away. Or maybe a few more bag ladies would be useful.

One thing is certain the solution is not a tax give away to the wealthy.

If it was just a tax break for the wealthy, I'd agree.
I don't think they should be denied a small cut just because they're successful.

Au, one of the tax cuts is for the working poor, to enable them to afford healthcare. I looked over it. It is maddenly complicated--but I hate for people to see only the small benefit for wealthy people, when many of the cuts will provide real help for the working poor.

Unless one reads the plan, they can be sold all types of incorrect information in the press. I was upset myself at mention of cuts on the VA. When I researched, I found the cuts are on vet's home subsidies which are not being used on a yearly basis, and already diverted to other programs. It is a maze, but we owe it to actually see what the cus are before trashing them. The Tax Cut plan is being spun like a top.

May 22, 2003, 10:21 PM EDT


Highlights of $350 billion in tax cuts and new spending that lawmakers plan to pass before Memorial Day. President Bush said Thursday he will sign the legislation.

* Overall: Would cut taxes by $330 billion through 2013. Also provides $20 billion to state and local governments to be paid over the next two years, half for Medicaid and half for other programs.

* Corporate dividends, capital gains: $148 billion. Would lower the top rate to 15 percent on taxes paid by stockholders on corporate dividends and the taxes on capital gains. Lower income earners would pay a 5 percent rate on both. The new rates would run through 2007; in 2008, the lower rate would drop to zero. In 2009, taxes on dividends return to rates paid on ordinary income, taxes on capital gains return to a top rate of 20 percent.

* Personal income taxes: $171 billion. Would accelerate several tax reductions that had been scheduled to occur later this decade. Highest income tax brackets would be reduced, reaching back to Jan. 1, from 38.6 percent to 35 percent, from 35 percent to 33 percent, from 30 percent to 28 percent and from 27 percent to 25 percent. The lowest, 10 percent bracket would be expanded in 2003 and 2004. The child credit would be increased to $1,000 per child from the current $600, in 2003 and 2004. For married people filing joint returns, the 15 percent bracket would be expanded and the standard deduction increased in 2004 and 2005. Would prevent more taxpayers from paying alternative minimum tax in 2003 and 2004.

* Business taxes: $10 billion. Would increase from $25,000 to $100,000 the equipment investment that small businesses can write off through 2005. Companies could depreciate 50 percent of newly purchased assets this year.

* Phaseouts: Many of the personal tax reductions would expire in 2005, others in later years. Many lawmakers believe Congress would be likely to extend those cuts in the future, increasing the bill's ultimate price tag.

From AU's post. . .

I haven't followed this one as close as I should have, but The Wall Street Journal and The Economist are using figures closer to the 800b than the 320b figure used by the administration, and neither are supportive of the deception. While neither adheres to the administration in all respects, I would rate both as quite conservative.

My own feeling is that tax cuts are generally good; dishonesty isn't.

The deception comes in the form of sunset clauses. Inorder to keep the tax cut at 320 billion they will fade out after a number of years. The truth of course is that will never happen and the actual tax cut is at least 800 billion. Bush got what he wanted and in fact in some reports that I read even more than he had originally proposed.

Truth and honesty is not one of the virtues of government.

The article Sofia quoted provides us with a factual description of a looming economic/demographic crisis facing Western Europe, and one which these nations have only just begun to address. Given the public and political response to even modest adjustments in retirement ages in France, I am not yet willing to bet they will succeed.

Somewhat higher female fertility and immigration and less rigid intrusion into labor markets make the dimensions of this problem in the United States far less, but we too must eventually face the issue as well.

There is another, and to me, even more compelling argument. It is that most government-run social programs eventually become dominated by unanticipated side effects which often obviate their direct benefits. Moreover such programs create their own, usually well-organized, tribe of direct beneficiaries who effectively resist reform in any guise. We do need to limit them,

Thus we have an education establishment which through unions, the NEA, and a network of federal and local bureaucrats has resisted any attempt to reform an obviously failing public educational system. Voucher systems which will reduce the funding of public schools by LESS than the per capita cost are described as "starving" public education. Higher (unionized) teacher salaries are called for despite the facts that measured school performance has a NEGATIVE statistical correlation with teacher salaries. Why? Private schools pay less, but perform better and are able to attract better teachers by freeing them from all the bureaucratic muddle and the nonsense of political correctitude.

Similarly the same establishment aggressively resists any change to a Head Start program which has been shown to have no measurable effect on the performance of its students in their subsequent years in school. Their remedy is LESS emphasis on learning in head start classes ! clearly the system is seen as an entitlement and a private feifdom by those who operate it,

None of this should surprise us. In our system we want our government to be fair and to victimize no one, more than we want it to be efficient and effective at what it undertakes to do. That is as it should be. However it also means that we should want tour government to be small and to avoid entry into fields of endeavor in which value judgements are routinely required and which others can do better.

The current political debate about deficits, dynamic scoring etc. is merely a convenience to both parties. The Republicans do want to achieve a smaller government , in part by cutting off its money supply at the source. The Democrats do resist this vigorously, because it threatens the entitlement programs that feed the menagerie of interests that make up that party.

georgeob1
Granted there are problems and side issues in dealing with social problem. In fact you can say that about anything the government gets involved in. As for the problems that Europe is experiencing they are the same as those that we have here at home. And they must be dealt with. In fact as you know the age of retirement will gradually be raised in the US to 67. That may move the pain further down the road but of course will not "fix" the problem. As yet no viable plan, if there is one, has been found.
That said what should we do cut off funding for social problems. Would you for instance being in favor of shutting down Social Security, Medicare, Medicaid and etc.
I can as a retiree speak to SS and Medicare. Although I have an income from other sources, without SS it would eventually be depleted and my proposed life span of 100 years would have to be reduced to 90 <joke>. Actually Medicare for most seniors is the most important government social program. If I and I will say most seniors did not have Medicare they would in short order be destitute. Medicare from what I had read did more to reduce senior poverty than any other government program.
In any event what I am saying problems and all we cannot in good conscience cut off social programs. That is unless we are prepared to treat our, poor and elderly and many others as they do in the third world

France OK's unpopular pension reform plan

Posted: Wednesday, May 28, 4:30pm EDT

Despite strikes already under way – and the threat of even larger walkouts next week – France's Cabinet OK'd an unpopular pension reform plan that will require workers to stay on the job longer before they may retire. President Jacques Chirac called the plan "urgent" and "fair" and said it would avoid having to resort to "brutal measures" later. The measure now goes to parliament, where Chirac wants a vote on it before the summer recess. The issue triggered a protest Sunday in Paris by an estimated 300,000 people.

au1929,

i believe the issue in France was whether to raise the minimum retirement age from 57 to 59, so you can see they have a long way to go.

I don't advocate the elimination of Social Security or Medicare, though I believe changes to both would be useful.

My main point was that the argument over deficits is a smokescreen by both political parties. The real fight is small government vs large government. Both Republicans and Democrats find it convenient to talk around that issue.

With the Medicare program Congress sets upper limits for funding and the bureaucrats, in turn, set upper limits on what they will pay for various services. Congress, to ease its social conscience has mandated that participating doctors and service providers do not charge their patients more than preset limits for each service. Because the funded payments are generally far less that the prices the providers seek (and often their real costs) they raise their prices to other customers for the same services. Many providers simply stop serving Medicare patients. So the result of the government's actions is rationing for those covered by Medicare and increased prices for those who are not.

In addition those covered by HMOs or even Blue Cross also enjoy significant discounts negotiated by the Insurer. These are not nearly as great as those in Medicare but they are quite large nonetheless. The net result is that the poor sap who has no insurance and who is not covered by Medicare is faced with enormous prices. He either foregoes the care or pays to get it and in effect subsidizes those with insurance or government benefits. Did anyone foresee this outcome? Does anyone accept responsibility for it?

Take a look at the size of the administrative staff the next time you visit your doctor. The added costs of all the paper shuffling must add at least 25% to our medical costs.

Now the government proposes to fix some of the problems it has created with still more legislation, "The patient's bill of rights". Will anyone stop to consider what its side effects might be?

georgeob1
That is why I firmly believe that universal medical coverage is needed. But that's another subject. Some way has to be found to afford medical coverage for all. At this juncture there are three distinct groups. Those who have coverage { paid for by themselves or employer or medicare}. Those who are poor and qualify for medicaid [which of course is paid for by your tax dollar] And those who have no coverage and too"rich" to qualify for medicaid. Those are the people who are really in trouble and must be helped. My solution or better still my opinion is that some form Universal Medical coverage is sorely needed.

au1929'

I suggest you do some research about the quality of care in Canada and the UK, both of which have such systems.

Wholesale rationing of access is the chief result. Socialism produces more or less uniform shortages and poverty in everything it touches.

georgeob1
What than would you suggest? If not some form of Universal coverage what than? After all the problem is real and will not just go away.

au1929,

I don't think there is a solution that is entirely free of defects.

A free market for medical services will likely produce the best average quality of care and yield the lowest average price. However, it will leave those unable or unwilling to pay without care. A free market for insurance can also protect people from catastrophic costs and distribute the average cost to a broad population. However, here too those who will not or cannot buy insurance will be out in the cold.

Government sponsored social systems inevitably add substantially to the average costs (bureaucrats, administrators, papers-shuffling, etc,) which is paid through taxes and transfers of costs to the unprotected, as discussed above. Moreover, because government becomes a payer, it actively works to limit the supply of providers and facilities - fewer doctors, fewer hospitals, etc. This, plus the inescapable effects of socialist distribution of services, tends to stifle the development of improved methods and the creation of new sources of supply (doctors, hospitals, etc.). (U.S. doctors & hospitals in our northern states do a big business serving well-off Canadians who got tired of waiting for their number to get to the top of the Province waiting list.)

In a similar way we have found no solution to poverty. Capitalism produces far greater average wealth than Socialism, but distributes in unequally. Socialism produces more equal distribution (but not for those in power) at the cost of far less average wealth. The differences can be large - average citizens of many Socialist countries had much lower physical standards of living than the poor in this country. However, our poor felt no less poor as a result.

I believe we should stay fixed on the basics and consider all the alternatives instead of just putting new government band aids on top of old ones.

This is an easy one, since Paul Krugman is always wrong.

Oh, and as to the subject; Republicans should be for doing away with all federal social programs, as they lack any Constitutional basis. However, what might make more sense given the realities that exist today would be to hold a Constitutional Convention and push for an amendment specifically delineating the federal government's role in running social programs. (I'm a pragmatist and just figure it might be easier to give the programs (some of them?) the legitimacy they lack than it would be to dismantle them for lacking Constitutionality.

I don't think it's so much that he's always wrong there Scat. I think he just doesn't ask the right questions.

From his column:



The question that stikes me there is "Why are people taking these programs for granted?"

Social Security, as an example, was NEVER intended to be the primary source of retirement income for every single person. The percentage of the population that was supposed to be eligible to collect was supposed to have been a small fraction. Yet any time any one proposes reforms to these programs the hue and cry goes out and everyone panics.

Social Security (as a system) is broken. We can either fix the system and get it back to what it was designed to be or we can scrap it and start over with something else.

Another good example that I've seen several comments on lately is the VA Medical System. There have been several comments right here on A2K about how Bush's tax plan harms the nations veterens. The VA system was, up until 2 years ago, available to those with service related medical issues. Under Clinton era changes the VA was opened up to include services for all military retirees and family members of military and retirees. If you look at the Bush budget there was an increase of $8 billion to the VA but the complaints go out about how the VA is reducing services. What choice do they have when the number of patients doubled?

These new patients will now fight tooth and nail to keep this service even though it should have never been allowed to begin with. The fact that people like myself (military retirees with no service related disabilities) can now walk into a VA medical center for any/all medical care is taken for granted and the funding "crisis" is now a political issue that has to be resolved...

fishin' - Good comments, but I do believe Krugman is in fact always wrong. (Or if he is ever right about anything, he has a personal rule against writing about it in his column.)